US Free Trade Agreement Implementation Bill 2004

Bills Digest No. 21 2004–05

US Free Trade Agreement Implementation Bill
2004

WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.

Passage History

Commencement:Schedules 1, 2 (Parts 1 and 2), 3,
4, 5, 7 commence on either the 1 January 2005 or the day AUSFTA
comes into force, whichever is the latter. Schedule 2 (Part 3)
commences after Parts 1 and 2 and the commencement of the
Agricultural and Veterinary Chemicals Legislation Amendment
(Name Change) Act 2004. Schedules 6 and 8 commence on Royal
Assent. Items in Schedule 9 commence on different dates, as
outlined in items 9 20 of the table in clause 3 of the Bill.

The United States (US) is Australia s largest
trading partner, and has been for a number of years. Trade disputes
between the two nations have been relatively frequent and have
included some of the disputes most widely publicised in
Australia.(1) On a number of occasions in the past, a
free trade agreement between the two nations has been mooted,
usually at the behest of the US. In late 2000, during the US
presidential election and subsequent disputes over the result, the
Australian Cabinet reached an in-principle decision that Australia
would try to secure a free trade agreement with the US if George W.
Bush was elected.(2) The logic seems to have been based
on the assumptions that Bush and his likely trade appointees would
be open to the idea, that the 1999 Seattle
Ministerial(3) had demonstrated difficulties with the
World Trade Organisation (WTO) process,(4) and that
there were significant barriers to bilateral trade that could be
reduced to the long-run benefit of the Australian community.

Two-way trade between the US and Australia in
2002-03 was A$44.1 billion, or some 14.1 per cent of Australia s
total trade.(5) The US was a more important source of
imports (A$28.6 billion) than a destination for exports (A$15.6
billion). Japan actually remains Australia s largest merchandise
trading partner and export destination, but stronger bilateral
services trade makes the US Australia s single largest trading
partner overall, services trade partner and source of imports.
Merchandise trade with the US has been growing slowly over the past
two decades and the relative importance of the US as a trade
partner has been declining. However, in services trade the US
importance as a trade partner has been
increasing.(6)

Australia is not a highly important partner
for the US, with only 1.1 per cent of total US trade, or
US$ 27.9 billion, in 2003, although Australia is the
destination for 1.8 per cent of US exports.(7) The US
has its largest bilateral surplus with Australia, or second highest
depending on how entrep t trade through the Netherlands is
treated. Overall, the US, like Australia, runs a large trade
deficit.

The US is a more important partner for
investment for Australia than for trade.(8) At the end
of 2003, the stock of US investment in Australia was some A$297.3
billion, or 30 per cent of the total, while Australian investment
in the US was some A$211.0 billion, or 42 per cent of Australian
investment abroad. It is interesting to note the US was the source
of 50 per cent of flows of investment into Australia in 2003 and
the destination of 52 per cent of Australian investment
abroad.(9)

The WTO s 2002 Trade Policy Review of
Australia(10) found that 45 per cent of Australia s
tariff lines were duty free, and more than 80 per cent faced duties
of 5 per cent or less. While the proportion of trade with the US
that is duty free could differ, it is unlikely to be substantially
different. None of the econometric studies of AUSFTA examined this
(although the 2001 CIE study cites earlier WTO Trade Policy
Reviews). Australia applies only one tariff rate quota (TRQ) which
is for cheese.(11) The highest tariffs are applied to
automobiles and parts, and textiles, clothing and footwear.

In the WTO s 2004 Trade Policy Review of the
United States, the US Government estimated that in 2003, 66 per
cent of all US imports entered duty free (including those under
various preferential programs).(12) However, given that
Australia is not currently eligible for any preferences, the WTO s
estimate that only 31 per cent of all tariff items enter the US
duty free is likely to be more applicable to Australia. While the
average tariff in the US is low, some tariffs are very high in the
range of 50 to 350 per cent principally on tobacco, peanuts, dairy
products, sugar and footwear. Additionally non-ad valorem
tariffs (tariffs not expressed as a percentage of the price) tend
to be high, TRQs apply to 1.9 per cent of all tariff lines and
complicated contingency measures (anti-dumping and countervailing
duties) are increasingly applied, often on a long-term basis.

Those sectors of merchandise trade that
already face no standard tariff barriers (technically known as Most
Favoured Nation tariff barriers) (likely to be some 30 40 per cent
of goods) and those services sectors where no improvement on the
two nations General Agreement on Trade in Services (GATS)
commitments have been made do not stand to gain directly from
AUSFTA. This is in addition to those sectors where no reduction in
trade barriers was achieved (such as sugar). On the other hand, the
increased protections and inter-governmental communications offered
by the agreement, and investment that may be stimulated by it,
could benefit all sectors.

In 1938, Sir Earle Page made a statement to
the House of Representatives that the possibility of a trade
agreement between Australia and the US was being studied by both
Governments.(13) This was the first of a number of
occasions more often at US initiative(14) on which the
possibility of a free trade agreement was raised, but for various
reasons was not implemented. The Government s 1997 White Paper on
Foreign and Trade Policy, In the National
Interest,(15) foreshadowed a shift to increased
emphasis on bilateral relations, including in trade. In late 2000,
the Cabinet made a decision to propose a bilateral free trade
agreement,(16) and this was signified by a speech by
Ambassador Thawley in New York in December 2000. Given the
chequered history of trade negotiations, incoming United States
Trade Representative (USTR) Bob Zoellick required bipartisan
support in Australia to consider the matter.

In May 2001, President Bush announced that he
was making approval for Trade Promotion Authority (TPA, also known
as fast-track ) from Congress his priority in trade policy. TPA
allows the President to negotiate trade agreements with other
states, subject to Congressionally-imposed conditions and
Congressional oversight, with agreement from the Congress that it
will not seek to amend any agreements achieved but simply vote them
up or down. A bill giving this authority to the President came into
effect in August 2002. In November 2002 almost two years into his
four-year term the President notified Congress of his intention to
enter into negotiations with Australia on a free trade agreement.
The first round of talks was held in Canberra in March 2003 and
agreement between USTR Zoellick and Trade Minister Vaile was
achieved on 8 February 2004.(17) The draft text of the
agreement was made public on 4 March 2004, and was soon referred to
the Joint Standing Committee on Treaties (JSCOT). In May 2004, the
Senate set up the Senate Select Committee on the Free Trade
Agreement between Australia and the United States of America
(Senate Select Committee). The Agreement was signed in Washington
on 18 May 2004 and the
final text of the agreement was released. JSCOT recommended
binding treaty action on 23 June 2004 and these Bills, implementing
AUSFTA, passed the House of Representatives the following day. In
July 2004, President Bush sent legislation to the Congress, and it
was passed in both chambers by large margins. President Bush signed
the agreement in Washington on 3 August 2004.(18)

The Productivity Commission is the Australian
Government's principal review and advisory body on microeconomic
policy and regulation. It conducts public inquiries and research
into a broad range of economic and social issues affecting the
welfare of Australians, including: competition policy,
productivity, the environment, economic infrastructure, labour
markets, trade and
assistance, structural adjustment and microeconomic reform.
Although there is a large amount of expertise in the Commission
regarding trade issues, no reference to the Commission regarding
AUSFTA was made by the Government, despite calls from a number of
trade experts.(19) The recommendations of both JSCOT and
the Senate Select Committee envisage an enhanced role for the
Productivity Commission in trade negotiations.

The Centre for International Economics was
commissioned by the Government in 2001 to evaluate the economic
impacts of a possible AUSFTA, and Trade Minster Vaile released the
results in June 2001. The report found that:

Australian GDP could be 0.33 per cent higher by
2006. This gap would then continue to widen, levelling off by 2010
at 0.4 per cent of GDP an annual increase in that year of nearly
US$2 billion.

The report is available from the DFAT
website.(20) It should be noted that the modelling
assumed full implementation of the agreement by 2006 and that all
agricultural trade would be liberalised, two important outcomes
that were not achieved in negotiations.

ACIL Consulting prepared a report on the
possible FTA for the Rural Industries Research and Development
Corporation. (21)The report found far fewer potential
benefits from a possible agreement than the CIE study.

Our assessment is that the economic benefits of
the FTA to Australia as a whole are, at best, very finely balanced.
The impact on Australian farmers is likely to be negative,
especially if domestic political considerations in the US prevent
genuinely free trade in the most sensitive industries sugar, dairy
and meat. Given this, the case for the FTA must rest on broader
strategic arguments, the articulation of which has not been clear
to date.

Trade diversion effects, the diversion of
government resources away from other trade initiatives, and the
disaffection of countries that on the whole are more important
trading partners, all threaten the worth to Australia of a special
trade agreement with the US. Note special : it is unlikely to be
genuinely free .(22)

While a number of assumptions differed between
the studies, one that seems critical is whether trade
liberalisation in and of itself induces productivity improvements
in the sectors involved. DFAT went further in criticising the ACIL
Consulting study, claiming that its methodology would imply that
unilateral trade liberalisation would be harmful to the Australian
economy, something contrary to recent experience and theoretical
foundation.

Once the details of the agreement were known
in February 2004, the Government commissioned a new study based on
the specific outcomes rather than the general idea of an
FTA.(23) Again this was awarded to the Canberra-based
CIE. Although many of the earlier assumptions had not been realised
notably, full and rapid agricultural liberalisation the new report,
released at the end of April 2004, found that the actual agreement
was likely to lead to greater economic benefits than the earlier
study.

The most probable effect on macroeconomic welfare
after a decade, as represented by real gross national product
(GNP), is an increase of $5.6 billion per year above what it might
otherwise be.

Merchandise and services trade liberalisation
contributes an extra $1 billion per year to both welfare and real
GDP above what it might otherwise be a decade out. The size of this
effect reflects several things. First, both Australia and the US
are already relatively open economies, with average tariffs of 4.5
per cent and 3.6 per cent respectively. Second, when tariffs are
removed preferentially, there is some trade diversion and that
offsets some of the gain. Third, the services markets in both
countries are also relatively open.

Indeed, the investment and productivity
impacts of the agreement in the CIE s model were the cause of the
bulk of the expected economic gain. This was criticised by some as
overstating the case.(24)

Dee Report

The Senate Select Committee commissioned its
own econometric evaluation of the likely impact of AUSFTA, by Dr
Philippa Dee.(25) The first section (and associated
appendices) of the Dee report gives a very clear accounting of the
trade liberalisation achieved in AUSFTA in various sectors,
compared to the two nations existing commitments under other
agreements such as GATS. The conclusion of the report is that:

Based on the alternative assessment, the annual
gains to Australia from AUSFTA are a mere $53 million. This is a
tiny harvest from a major political and bureaucratic endeavour. And
the figure does not reflect further unquantifiable costs, such as
associated with safeguards on manufactured goods and the additional
tightening of intellectual property rights.(26)

The US government is required to commission
the US International Trade Commission (USITC) to produce a report
on the economic effects of each free trade agreement negotiated
with Congressional TPA. In May 2004 the USITC published its
findings regarding AUSFTA.(27) It found a relatively
small net gain to the US economy, in the order of US$ 500
million per year when fully implemented.

A number of other studies have examined
AUSFTA, either in full or in part. A major study commissioned by
DFAT looked at the broader non-quantifiable effects of a potential
FTA with the US, and was enthusiastically in favour of the
agreement.(28) The Australian Manufacturing Workers
Union commissioned a study by Dr Peter Brain, released in June
2004, and this found potential costs of A$ 46.9 billion,
mainly from restrictions on the ability to pursue an active
industrial policy.(29) An International Monetary Fund
study of the impacts of various US FTAs found that AUSFTA was
likely to have a small negative effect on Australia, and a similar
effect for the global economy.(30) This was caused by
trade diversion from Japan, Asia and the EU.

The schedule of the negotiations of AUSFTA is
extensively covered in a paper by Ann Rann.(31) What is
most apparent about the timing is that there was a major delay from
the announcement of an intention to seek negotiations (August 2001)
and the actual beginning of negotiations (November 2002). A
reduction in this delay would have meant substantive negotiations
were less affected by the logic of US Presidential (and
Congressional) elections in November 2004.(32) In part,
this delay was caused by the time taken to grant TPA to President
Bush.

The Coalition parties have made clear their
support, for the FTA, despite some apparent reservations before the
close of negotiations at the beginning of 2004 related to the
non‑inclusion of all agricultural sectors in
AUSFTA.(33) The Democrats, Greens and One Nation have
all expressed opposition to the agreement, focussing on issues such
as the Pharmaceutical Benefit Scheme, investment, intellectual
property, culture and other issues. The ALP has been reserved about
the agreement from the start of negotiations, committing to
awaiting the findings of the Senate Select Committee before
determining its policy. It has recently announced it will support
AUSFTA, subject to two provisos and with a commitment to enact
further legislative change if it wins governments (see Concluding
Comments, below).

A number of groups have expressed concerns
about the potential inability to develop local content restrictions
in new media as they evolve under AUSFTA and the one-way ratchet
(quotas can only go down), although it is possible that these
concerns are overstated, or reflect a protectionist motivation. A
number of community groups have expressed concern that the
increased mechanisms for bilateral consultation regarding
quarantine issues may actually lead to a downgrading of existing
protections. Some agricultural groups have expressed concern that,
although for now single desk arrangements(34) have been
preserved, Australia has agreed to cooperate with the US in the WTO
on the issue.

JSCOT issued its report on AUSFTA in June
2004, and made 23 recommendations including recommending binding
treaty action to implement AUSFTA.(35) A dissenting
report was issued by the ALP members of the Committee (requesting
more time for consideration). Some of the most important committee
recommendations were:

the Productivity Commission review the operation of
AUSFTA every five years after it comes into operation

consultation with state and territory governments be improved
in future negotiations

a number of principles must be taken into account in
implementation of AUSFTA to ensure the integrity of PBS

active measures be taken to promote increased market access for
sugar, and to improve recognition of qualifications and movement of
business people

local content levels for broadcasting be protected by
legislation

legislate to protect academic and research access to copyright
material, and take other measures to ensure the consistency of
proposed changes with other (more lenient) aspects of the US
intellectual property system, and

the Government review the environmental impact of AUSFTA and
legislate for this to happen for all future FTAs.

The Senate Select Committee released a summary
of its findings on 2 August 2004.(36) The ALP members of
the Committee raised 43 qualifying recommendations about the
agreement as it stands (see endnote 55), while nonetheless
recommending the Senate support the agreement (which meant that,
with coalition support, the majority of committee members supported
the agreement). Among the many concerns the ALP members of the
Committee expressed were a number related to intellectual property
issues, the PBS and generic drugs, manufacturing protection and
local media content.

Thus, both Parliamentary Committees found that
a number of aspects of AUSFTA could be improved, even given the
finalisation of negotiations. At the same time, both found that on
balance AUSFTA was likely to be a net benefit to Australia.

As JSCOT argued, AUSFTA is GATS-plus, that is, it goes further
than GATS in liberalising services trade by using a negative
list approach all sectors are included unless specifically
excluded. While this is desirable, there do not appear to be any
substantial innovations in AUSFTA in services compared to Australia
s other bilateral agreements and there appears to be somewhat less
liberalisation from the US perspective than in its recent
agreements with Chile and Singapore, particularly regarding
mobility of skilled labour.(37)

The opening up of government procurement markets is desirable
from a trade perspective, while safeguards have been included for
indigenous Australians, any socially or economically disadvantaged
minorities in the US and small business in both countries.

The inclusion of mechanisms to increase competition policy
cooperation is a WTO-plus aspect of the agreement, as JSCOT argued.
While this does not go as far as under CER (FTA with New Zealand),
this seems appropriate given the different policy structures that
currently exist.

The exclusion of investor-state dispute settlement provisions,
such as those that exist in NAFTA, is likely to alleviate concerns
many in the community have about trade agreements impinging on the
ability of governments to legislate on legitimate social
issues.(38)

Increased connection to the largest/most dynamic economy in the
world the US had 20.9 per cent of world GDP in 2003, and 12.4 per
cent of world exports (and 4.9 per cent of global
population).(39) This increased connection will not only
occur through trade, but also through greater two-way investment,
greater people-to-people contact (especially at the business level)
and greater attention in the media (if only for a limited period)
to each other s nation.

Improve Australian management practices, especially in services
and the use of information technology.(40) In
particular, US managers have demonstrated a strong preparedness to
put new ideas into practice whether this relates to personnel
issues like affirmative action and promotion of women and migrants,
and adoption and innovation of new information technologies, or to
the generous funding of universities and research.

Australians have never saved enough to provide for their
investment requirements(41) and there is a constant need
to find sources of new fixed investment.(42) It has been
noted that when the US has signed free trade agreements there has
been a tendency for a surge in investment to occur, not just to
take advantage of new opportunities opened up by the agreement
per se (and much attention has been paid in the agreements
to investment), but through a head-turning or advertising effect of
the discussion and policy process preceding Congressional approval
of a deal.(43) Since the relaxation of foreign
investment screening need apply only to US firms, existing
agreements with New Zealand and Japan may be somewhat compromised
and will possibly lead to wider investment deregulation in the
long-run. The agreement is also being promoted in the US on the
basis that Australian investment in the US will
increase.(44)

Some Australian industries will be given a competitive
advantage (with respect to US tariffs/quotas) ahead of their
competitors in nations without free trade agreements with the
US.(45) For example Australian aluminium producers, with
tariff free access from year one, will have an advantage over other
exporters from countries without a free trade agreement with the
US.(46)

Contrary to the claims of some critics, AUSFTA may increase
Australia s ability to reach trade agreements with important Asian
trading partners.(47) This is not only because Australia
will have enhanced access to the US market, and will be offering
preferential access, say, to US cars over Japanese or Korean cars,
but also because Australia has demonstrated that it is now willing
to leave sensitive agricultural sectors out of trade liberalisation
deals.

The provision of information to consumers through labelling,
for example, of genetically modified ingredients, will be
maintained despite US objections.

As an FTA partner, DFAT claims Australia will be exempted from
US safeguard actions almost automatically.(48) This is a
protectionist tool that the US is increasingly invoking. This will
be particularly important for those agricultural industries not
specifically listed as being subject to safeguard protections.

One significant problem with AUSFTA from
Australia s long term trade perspective relates to the rules
regarding free trade agreements in the WTO. Article XXIV of the
General Agreement on Tariffs and Trade (GATT 1947)
requires that free trade agreements (and customs unions) should
cover substantially all trade. While AUSFTA excludes sugar
and a number of services covered under GATS, it would be difficult
to argue that it does not meet this criterion. However the
Marrakesh Agreement (1995) clarified Article XXIV (which
had been increasingly ignored by GATT members) and strengthened its
discipline.(49) In particular the length of phase-in
periods in FTAs (Article XXIV:5(c)) was limited to 10 years
except in exceptional cases. In cases where parties
believe that 10 years would be insufficient they shall provide a
full explanation to the Council for Trade in Goods of the need for
a longer period. It is difficult to see a compelling reason for
extended phase-in periods in the case of AUSFTA, especially since
both countries are signatories to the (APEC) Bogor declaration
committing them to free trade by 2010. Most of the barriers in TCF
and automobiles will be phased out over the whole ten years, and of
course, a number of agricultural barriers will be in place for at
least 18 years.

In its inquiry into the SAFTA, JSCOT praised
the agreement for reinforcing Australia s position on free trade in
agriculture.

Unfortunately, AUSFTA can be seen as
presenting a negative precedent in the sense that Australia has
accepted the continuing subsidisation of US agriculture through
export credits and the exclusion of sensitive agricultural products
from trade agreements. Perhaps coincidentally, exclusion of
sensitive products was recently accepted on the Doha agenda. In
addition Australia has agreed to unprecedented price mechanisms
(51) (safeguards) that will reduce access to the US beef
market in the case of quite moderate downward fluctuations for US
producers,(52) and there are safeguards for many
horticultural products.

Significant concerns have been raised about
the value of a bilateral, as opposed to multilateral, approach to
trade liberalisation. It has been argued that a piecemeal approach
to trade agreements may result in an incoherent system, as a US
Congressional Committee advised in relation to the US Singapore
Free Trade Agreement:

A minority believes that, though not a fault of
the Agreement, there is a concern that the current melange of
global, regional and bilateral international trade agreements have
different, [in]congruent and conflicting substantive, procedural
and enforcement provisions. This creates confusion and uncertainty
and encourages global forum shopping and multiple proceedings.
Congress should look at this patchwork quilt in its entirety, not
only one piece at a time and consider the long term impact these
agreements will have on American interests over the long
term.(53)

This is similar to the spaghetti bowl problem
identified with such clarity by Professor Bhagwati: the more FTAs
that are signed, the more incompatible standards and rules of
origin emerge. (54)This makes free trade an
administrative mess, and eliminates one of the large efficiency
gains possible from moves to free trade. In particular for
Australia, sourcing of components from New Zealand suppliers under
CER might affect the ability to claim tariff free status for
exports. In the TCF case, this effect is expected to preclude 80
per cent of Australian manufacturers making any substantial gains
in the US as a result of AUSFTA.

It can be argued that Australia might have
negotiated a better deal had the negotiations been conducted
earlier, with more political distance from the US presidential and
congressional elections.(55) At the time of the
finalisation of negotiations US beef was facing difficulties due to
the outbreak of BSE, and the inclusion of sugar in the US FTA with
five Central American countries had raised the lobbying efforts of
US sugar producers, who are concentrated in electorally important
states. (56)

that Australia has traditionally opposed the inclusion of
geographical indications on the trade agenda in the WTO, so it
seems somewhat surprising that this has been included in
AUSFTA

Australia s export monopolies are left in place, although
Australia has promised to cooperate with the US in the WTO
regarding state-trading enterprises (STEs). Investigation of STEs
has been one of the gains the EU could claim in the recent Doha
Round negotiations

while Australia has supported developing countries efforts to
limit the inclusion of labour and environmental standards in the
WTO, as essentially a form of implicit protectionism, these areas
have been included, albeit in an attenuated form, in AUSFTA

generally, the most protected industries for example, sugar in
the US and textiles, clothing and footwear (TCF) in Australia
retain their protected status longer than other industries,
something that will not encourage the specialisation in areas of
comparative advantage that is the basis of gains from trade
agreements

the intellectual property (IP) chapter contains highly
prescriptive requirements for Australian IP law. This is especially
the case for copyright, where AUSFTA requires the extension of
performers rights, a twenty-year extension to the duration of
copyright (longer for photographs), extended criminalisation of
infringement and use of circumvention devices and an onerous regime
for the policing of internet service providers. This chapter will
severely circumscribe Australia s ability to craft IP law that
balances the needs of creators and innovators against users and
consumers. Given the increasing role that information plays in the
economy, this could involve significant costs in the future. Of
most concern are those provisions that restrict trade by allowing
IP holders to control imports and exports of their products (known
as parallel importing). In the area of patents, Australia has
agreed to respect patent holders rights to prevent parallel
importing. In the area of copyright, Australia may have agreed to a
system for protecting technological protection measures that allows
copyright owners to effectively prevent parallel importing through
region-coding devices.(57)

Aside from the merits or demerits of the
agreement itself, Parliament also has to consider whether the Bill
proposes the best means to implement the agreement. It is important
to appreciate that the implementation is not merely a technical
matter, but also involves policy issues of substance and
process.

The provisions of the Bill are analysed in the
Main Provisions section below. Observations about those provisions
are made in the Concluding Comments section.

Schedule 1 of the Bill is comprised of two
Parts. Part 1 deals with US originating goods or the rules of
origin, implementing Chapter 5 of AUSFTA, and Part 2 deals with the
conferring of verification powers in relation to certain trade
items (implementing Article 4.3.2 AUSFTA).

Part 1 of the Bill proposes changes to the
Customs Act 1901 in relation to the rules of origin. These
amendments reflect the agreements reached under Chapter 5 of
AUSFTA, providing comprehensive and descriptive rules to determine
the origin of individual products. Under the new scheme, whether a
product can qualify as a US originating good would determine
whether the product is eligible for preferential customs rates
under the Customs Act 1997.(58)

Proposed new section 153YB
stipulates that goods wholly obtained or produced entirely in the
US are of US origin . Subsection 153YB(2) provides
an exhaustive list of circumstances according to which a good is
classified as wholly obtained or produced entirely in the US .

Goods are considered to be of US origin if
they were produced entirely in the US or in the US and Australia,
using exclusively originating materials. The term originating
material is defined in proposed section 153YA, including, for
example, goods which are of US origin and which are used in the
production of other goods.

Proposed section 153YE sets
out the requirements according to which a good (except clothing and
textiles), which was produced entirely in the US, or in the US and
Australia, from non-originating material, may qualify as a US
originating good. Proposed subsections 153YE(2),
(4) and (7) stipulate three essential
requirements that a US originating good must fulfil, including:

that the good satisfies the transformation test set out in
subsection 153YE(8) or, for example, that the
non-originating material does not exceed 10 % of the customs value
of the goods (paragraph 153YE(2)(a) and (b))

that the good satisfies the regional value content requirement
(paragraph 153YE(4))

that the good satisfies any other requirement set out in
Schedule 1 of the Free Trade Agreement Regulations
(paragraph 153YE(7)).

Refer to the Explanatory Memorandum of the Bill for a more detailed
discussion of this complex provision and
examples.(59)

Proposed section 153YF provides specific rules
for goods that classify as chemicals, plastics and rubber. Similar
to Rule 3 above, a good produced entirely in the US, or in the US
and Australia, from non-originating material that fulfils all the
requirements set out in proposed subsections
153YF(a) to (f) will qualify as a US
originating good.

Proposed section 153YH sets
out the requirements according to which a clothing or textiles
good, which was produced entirely in the US or in the US and
Australia from non-originating material, may qualify as a US
originating good. This provision is similarly structured as Rule 3
above. Proposed subsections 153YH(2) and
(4) stipulate two requirements a US originating
good must fulfil, including:

that the good satisfies the transformation test set out in
subsection 153YH(7) or, for example, that the
non-originating material does not exceed 7% of the total weight of
the goods (paragraph 153YH(2)(a) and (b)),
and

that the good satisfies any other requirement set out in
Schedule 1 of the Free Trade Agreement Regulations
(paragraph 153YH(4)).

Refer to the Explanatory Memorandum of the Bill for a more detailed
discussion of this complex provision and
examples.(60)

Chapter 62 of the Harmonised Commodity
Description and Coding System ( Harmonised System ) as devised
by the World Trade Organisation deals with articles of apparel and
clothing accessories, not knitted or crocheted. Proposed
section 153YI stipulates a specific three tiered test to
determine US origin for goods falling within the scope of Chapter
62.

This rule would apply to standard accessories,
spare parts and tools. Proposed section 153YJ sets out the test to
be applied to goods comprised of an underlying good and standard
accessories, standard spare parts or standard tools ( parts ). The
parts would only qualify as US originating goods, if:

the underlying goods are US qualifying goods

the parts are not invoiced separately, and

the parts are of a usual quantity and value in relation to the
underlying good (proposed paragraphs 153YI(1)(a) to
(c)).

Where, however, the underlying good has to be
tested for its origin under Rule 3 discussed above, to satisfy the
regional value content, the value of the parts must be taken into
consideration (proposed paragraphs 153YI(2)).

As a general rule, packing material and
containers used to package goods for retail are to be disregarded
from the operation of the Division, if they are classified with the
goods in accordance with Rule 5 of the General Rules for the
Interpretation of the Harmonized System. Rule 5 specifies, for
example, containers and packing material such as camera cases,
musical instrument cases, gun cases, drawing instrument cases or
necklace cases, which therefore would be disregarded.
(61)

Where, however, the packaged goods have to be
tested for their origin under Rule 3 discussed above, to satisfy
the regional value content, the value of the packaging material
must be taken into consideration (proposed paragraphs
153YH(2)).

Where goods went through any other country
than the US or Australia, undergoing there a process of production,
proposed section 153YL provides that the goods can
not be US originating goods within the meaning of the Act.

enforce or assist in the enforcement of measures affecting
trade in textile or apparel goods

ensure the accuracy of claims of origin

enforce or assisting in the enforcement of measures
implementing international agreements affecting trade in textile or
apparel goods, and

prevent circumvention of international agreements affecting
trade in textile or apparel goods.

The proposed amendments apply only in relation
to the trade with textile or apparel goods, enabling Australia,
either upon request by the US or on its own accord, to determine
that a claim of origin for the good is accurate (Article 4.3.2 of
AUSFTA).

Item 6 of the Bill inserts
proposed new Division 4B dealing with exportation
of textile and clothing goods to the US. Central to this Division
is proposed section 126AE which confers to
certain, specifically authorised officers ( verification officers )
the power to request records or ask questions from:

exporters or producers of goods as defined in proposed
subsection 126AE(4) (proposed paragraph
126AE(1)(a)) or

persons involved in the transport of such goods from
Australia to the US (proposed paragraph
126AE(1)(a)).

The person subject to the request is not
obliged to provide the records or answer any questions
(proposed paragraph 126AE(2)) and the strict
liability offences, sections 243SA (failure to answer questions)
and 243SB (failure to provide documents or records) of the
Customs Act 1901, will not apply.

Item 8 proposes to introduce
a new Subdivision JA Powers to monitor and audit
Australia United States Free Trade Agreement. The proposed
provisions in this subsection would create several powers for the
purpose of verifying information relating to the export, production
or transportation of textile and clothing goods that are exported
to the US. (proposed section 214BAA).

The powers created are set out in
proposed subsection 214BAC(1), including:

the power to search a premises (paragraph
214BAC(1)(a))

to take photos (paragraph 214BAC(1)(b))

to take and inspect or analyse samples (paragraph
214BAC(1)(c)), and

to test record keeping (paragraph
214BAC(1)(g)).

The powers created under this section can only be
exercised if it is reasonably necessary for the purpose of
verifying information relating to export, production or
transportation of textile and clothing goods that are exported to
the US. (proposed subsection 214BAE(1))

Further, the power to enter premises is
subject to the voluntary written consent given by the occupier
(proposed section 214BAE). The section does not
provide for entering the premises on the basis of a warrant. To
obtain the requisite consent, the verification officer must follow
certain procedural steps set out in this proposed section.

Under proposed section
214BAF, a verification officer can be accompanied by a US
customs official, subject, however, to the occupier s voluntary
written consent. However, even where an occupier does not consent
to a US customs official accompanying a verification officer, any
information obtained by a verification officer in the course of
exercising the powers under the Act can still be disclosed to a US
customs official (proposed section 214BAJ). The
Bill does not specify that the occupier has to be informed about
this.

The verification officer has the power to ask
questions and ask for reasonable assistance in performing his
duties (proposed section 214BAH and
214BAI).

Also provided are powers:

to operate equipment, such as computers, containing information
relevant to the information verification, and

to transfer electronically stored information onto disks and to
remove those disks from the premises (proposedsubsections 214BAC(2) and (3)).

It is a prerequisite under proposed
section 214BAK that the person operating the equipment
must hold a reasonable belief that the operation will be safe for
the equipment. Where damage to the equipment occurs,
proposed section 214BAL provides for a
compensation regime that, under certain circumstances, provides the
owner of the equipment with avenues to obtain compensation.
However, the legislation possibly contains a gap which could result
in unnecessary complications for the parties. It seems arguable
that the preliminary decision to operate the equipment based on the
reasonable belief that it is safe is not covered by the
compensation provision. This situation should be resolved by
amending proposed subparagraph 214BAK(1)(b)(ii) to
include the situation where the person lacked the reasonable belief
required pursuant to proposed section 214BAK.

Agricultural and veterinary chemicals, and
labels for those products, require approval or registration with
the Australian Pesticides and Veterinary Medicines Authority
(APVMA, formerly the National Registration Authority, NRA) before
they can be marketed. This process is called marketing approval.
The process requires the applicant to provide certain data to
APVMA, demonstrating that the chemical is safe and effective.

This schedule proposes a new regime for the
protection of that data. This affects the practice of
springboarding generic products. Generic products are those
produced by manufacturers other than the owner of the patent in the
product. Springboarding is a process which allows a generic product
to get marketing approval on the basis of test data that has
already been submitted by the original product s manufacturer. This
allows the generic manufacturer to avoid duplicating much of the
costly and time-consuming process of chemical testing, resulting in
a faster entry to market and therefore cheaper product prices.

Article 17.10 establishes certain requirements
for the regulation of agricultural chemicals and pharmaceuticals.
Pharmaceuticals are discussed below, under Schedule 7.

Article 17.10 requires that generic products
not be permitted to springboard in the first ten years after the
original product has been given marketing approval this is known as
the data exclusivity period. It also requires that the
information submitted to the government for the purpose of
obtaining marketing approval be protected from unfair commercial
use .

Currently, the Agricultural and Veterinary
Chemicals (Administration) Act 1992 provides an effective data
exclusivity period of five years (s 69EY).

In order to ensure compliance with AUSFTA, the
Bill proposes a ten year data exclusivity period where use of the
product within ten years would be commercially unfair (item
8, proposed subsection 14B(2)).

Item 8 proposes to severely circumscribe the
remedies available to the original product manufacturer if
information is used in breach of this rule. Proposed
subsection 14B(3) would provide that the use of
information in contravention of the rule (for example, within the
ten year period) would not affect the validity of any registration
that results from that use. Proposed subsection
14B(4) would prevent the original applicant from claiming
any compensatory remedy against the Commonwealth or its agents in
relation to the misuse of information. In other words, except for
injunctive relief before a second (or subsequent) product
has been registered, the Bill would provide no relief to the
original product manufacturer in the event that the data
exclusivity period is breached. In practice, the Bill s attempt to
remove remedies for breach of the law by APVMA may not be effective
if courts hold that a decision to grant registration within the ten
years was not properly made.(62)

Beyond implementing AUSFTA, the Bill proposes
several other changes to the way information supplied to APVMA may
be used. These are not directly required by AUSFTA, but do deal
with the issue of how the data provided to APVMA is protected.

According to the Second Reading Speech, these
reforms represent part of a suite of reforms devised by the
government with the agreement of key stakeholders including all
State and Territory Governments .(63) According to the
Trade Minister, a second set of reforms will be proposed in a
subsequent Bill.

There does not appear to have been much
commentary from stakeholders on the provisions proposed in the
Bill. However, the Pastoralist and Graziers Association of Western
Australia has indicated opposition to the ten year data exclusivity
rule on the basis that it overrides the outcome of earlier
stakeholder consultation on data protection and it could increase
the costs of chemicals.(64)

The Bill proposes a detailed scheme for the
protection of data in different circumstances. This Digest does not
examine these provisions in detail.

GIs are words or expressions protected for the
use of producers from a particular geographical region. Australia
has a system for declaring and protecting GIs for wine and spirits
under the Australian Wine and Brandy Corporation Act
1980.

Article 17.2.7 requires that interested
parties have an opportunity to seek refusal or cancellation of a
GI. Article 17.2.12(b)(v) requires that GIs be refused on the
grounds that they are likely to cause confusion with a pre-existing
trade mark or a good faith pending application for a trade mark.
The current law does not comply with these requirements.

Schedule 3 proposes amendments to the
Australian Wine and Brandy Corporation Actto require
the Geographical Indications Committee to take account of
pre-existing trademark rights when determining geographical
indications (GIs). This would involve the following process:

notice of a proposed GI must be published if an application for
a GI has been made or if the committee is considering a GI on its
own initiative. The notice must set out the GI and invite written
objections within one month (item 11, proposed section
40RA)

a person may object to a GI on the following grounds:

if he or she owns a registered trade mark that
consists of a word or expression identical to the proposed
GI or of a word or expression with which the GI is likely to cause
confusion, or the proposed GI contains a word or
expression with which the GI is likely to cause confusion and the
owner has trade mark rights in the word or expression

if he or she has an application pending for registration of a
trade mark, any of the above conditions apply, the application was
made in good faith and there is a prima facie case for accepting
the trade mark, and

if he or she has trade mark rights in an unregistered trade
mark, any of the conditions of the first ground are met and the
trade mark rights were acquired through use in good faith

objections are made to the Registrar of Trade Marks, who
decides whether the objector has a ground. Even if the ground is
made out, the Registrar may recommend to the Committee that it is
reasonable in the circumstances to determine the proposed GI,
although such a recommendation must be made with regard to
Australia s international obligations (for example, AUSFTA)

decisions by the Registrar of Trade Marks on these issues may
be appealed to the Federal Court, and

the Committee may not determine a GI until any trade mark
issues have been resolved, including appeals. The Committee may not
determine a GI if the Registrar of Trade Marks has decided that the
grounds for objection are made out and does not recommended the
determination, unless the objector consents.

This process will apply to any GIs that have
not been finally determined by the date of commencement. In other
words, it may apply to GI s still under consideration by the
Committee.

Schedule 3 also proposes a scheme for the
cancellation (called omission ) of GIs by the Committee. This would
be possible where a GI is not in use (as defined by
proposed s 40ZAF) or where a GI is no longer
required (according to the process outlined in proposed s
40ZAI).

Chapter 13 of AUSFTA makes certain
requirements of Australia in relation to financial services, which
includes life insurance. The key obligation is national
treatment treating US life insurance companies no less
favourably than domestic companies in like circumstances.

Currently, the Life Insurance Act
1995 provides that only companies incorporated in Australia
can carry out a life insurance business (through definition of
company in the dictionary Schedule, among other
provisions).

The Bill proposes the creation of a new
category of life insurance company, to be known as an eligible
foreign life insurance company (items 1 and
25). Such a company must, among other criteria, be
authorised to carry on life insurance business in another country,
have an Australian branch or propose to establish one and meet
conditions specified in the regulations. These conditions would
include, but not be limited to, a list of countries in which
eligible foreign life insurance companies may be incorporated.
Presumably, the United States would be placed on this list.

The Bill would set certain governance
requirements for eligible foreign life insurance companies. These
would require the company to nominate a Compliance Committee , who
would have management responsibility for the Australian branch of
the company and be responsible for ensuring the company complied
with the Life Insurance Act. Items 11 and 12 would
empower courts to grant injunctions against members of the
compliance committee in order to enforce the Act.

In AUSFTA, Australia agreed to relax its
requirement for Foreign Investment Review Board (FIRB) review and
screening by the Treasurer of proposed US investments in Australia
(Annex 1 Australia 2 3). This was done be agreeing to raise the
threshold below which most investments do not require review and
screening. The threshold is currently A$50 million and this must be
raised to A$800 million where US investors are involved. Lower
thresholds or other conditions still apply in certain 'sensitive'
areas such as real estate, banking, aviation, shipping, media and
telecommunications.

define investors from a specified country as prescribed
foreign investors which could allow them to be treated as
non-foreign investors in certain circumstances (proposed s
17E)

define specified foreign government investors as prescribed
foreign government investors, again allowing them to be
treated as non-foreign investors in certain circumstances
(proposed s 17G)

define a business activity as a prescribed sensitive
sector (proposed s 17H)

determine the screening threshold for proposed acquisition of
shares or assets by a prescribed foreign investor or a
prescribed foreign government investor. The regulations
would be able to determine different thresholds for a variety of
different contexts, including in relation to different countries
and different sensitive sectors (proposed ss 17A, 17B,
17C), and

Regulations would determine the entire scope
of all the substantive provisions of proposed Part IA. Presumably
the Government will make regulations under these provisions to
ensure compliance with AUSFTA. It is possible that regulations
under these provisions could extend the benefits of these
provisions beyond the United States, to include investors from
other countries.

Chapter 15 of AUSFTA imposes certain
obligations regarding government procurement. In general, this
involves a commitment not to discriminate against US providers in
awarding government contracts, although there are several
exceptions to this principle.

Item 1 proposes to provide
the Finance Minister with the power to issue directions to
prescribed Commonwealth authorities and companies on matters
relating to procurement, on the condition that such directions are
consistent with international agreements concerning government
procurement (such as AUSFTA). This change will enable the Finance
Minister to ensure that Commonwealth authorities and companies are
subject to the Commonwealth Procurement Guidelines that
apply throughout the public service.

It is understood that other changes to ensure
compliance with AUSFTA will be made through amendment to those
guidelines.

As with agricultural and veterinary chemical
products (see above), Article 17.10 makes similar requirements for
the regulation of pharmaceuticals. It requires:

data exclusivity period of five years

that measures be provided in the marketing approval process to
prevent generic manufacturers from entering the market during the
term of a patent, and

that, where generics are permitted to request approval to enter
the market during the life of a patent, the patent holder must
receive notification of any such attempt, including the identity of
the applicant.

See the Parliamentary Library s Research
Note The PBS and the Australia US Free Trade Agreement for
more detailed discussion of these provisions and their
implications.(66)

Currently, the Therapeutic Goods Administration
(TGA) is prevented from allowing generic manufacturers to
springboard in the first five years following registration of the
patented product (s 25A , Therapeutic Goods Act 1989).
Aside from this requirement, the TGA is not concerned with any
intellectual property issues when considering applications to
register a drug.

Schedule 7 proposes that, in
addition to existing requirements, applicants for registration of a
new drug must supply a section 26B certificate with their
application. This certificate must state either:

that the applicant is not marketing, and does not propose to
market, the drug in a manner that would infringe a patent in
relation to that drug, or

that a patent has been granted in relation to a drug,
that the applicant proposes to market the drug before the end of
the term of the patent and that they have notified the patentee
that they have applied for registration of the drug (item
6).

A new offence is proposed for providing false
or misleading material information in the certificate, with a
maximum penalty of 1,000 penalty units ($110 000). Read with
cl 5.6 of the Criminal Code, the wording of this offence
would require that it apply even if the person did not
intentionally provide false or misleading information, as long as
they were reckless as to this fact.(67)

This schedule would introduce a new
certification scheme in which generic manufacturers must either
certify that they will not infringe a patent or certify that they
have notified the patent holder of their intentions. The ALP has
been concerned that the notification requirement could lead to
spurious infringement claims launched by patent holders to delay
the entry of generics. While a civil remedy is currently available
against unjustified threats of infringement action (ss 128
129, Patents Act 1990), there may not be a significant
disincentive to actually launching such claims, especially where
the patent holder may stand substantially to benefit from such an
action. To this end, the Opposition has indicated that it will
propose an amendment to introduce a penalty for spurious
claims.

The proposed changes to the Patent Act
1990 are relatively minor. They include expansion of the
grounds for opposition to patents and removal of conditions on
patents. Despite some earlier concerns, they do not involve any
change to the tests for patentability.

The copyright changes [proposed by the Bill] would
introduce a regime that is more protective of copyright and more
punitive toward infringement. These changes would: expand
performers rights, including the creation of performers copyright
in sound recordings; extend the duration of copyright protection;
introduce a more protective regime for electronic rights management
information and broadcast decoding devices; criminalise more
infringing and some non‑infringing conduct; extend the scope
of copyright to include all temporary reproductions; and introduce
a new regime for determining the liability of carriage service
providers.

In several areas, the proposed implementation
either goes further than AUSFTA requires or fails to take advantage
of exceptions and limitations that AUSFTA allows. More generally,
the Bill introduces no new mechanisms to counter-balance the more
protective copyright regime, such as a broad fair use exemption or
stronger competition laws. The result is that, in several respects,
this Bill would give Australia a more protective copyright regime
than the United States.

Copyright is a complex area of law and changes can
produce unexpected results. As a result Australia has tended to
pursue copyright law reform with wide, public consultation with
stakeholders and experts. In several areas, changes proposed by
this Bill conflict with the recommendations that have arisen
through those processes, including those from the very recent
review of the 2000 Digital Agenda reforms by law firm Phillips
Fox.

It seems that little or no public consultation has
been involved in the preparation of this Bill. Given the complexity
of the reforms and the substantial issues of policy involved, a
special public inquiry into the proposed copyright changes could be
warranted.

Central to the amendments are items
8 and 9 of the Bill, proposing changes to
section 16 of the Act. Should these amendments take effect, goods
originating in the US(68) will be generally free of
customs unless the Act expressly specifies a rate for a particular
good (proposed paragraph 16(k)(i)).

Item 14 introduces a
regulation making power in relation to matters:

required or permitted under the Act (proposed
subsection 21A(a)) or

necessary or convenient to be prescribed for carrying
out, or giving effect to, the Act (proposed subsection
21A(b)).

Items 15 to 34
make amendments to various items in Schedule 4 of the Act,
specifying express concessional rates for a range of products.

Items 1 to 133 of proposed Schedule
5 would provide express custom rates to be imposed upon
certain alcohol, tobacco and petroleum products which are in line
with excises imposed upon equivalent domestic products. This is in
accordance with Article 1.2.4(a) of AUSFTA. These items are not
subject to the phasing regime agreed upon under AUSFTA, except for
item 121, stipulating a custom rate of 5% applicable to certain
carbolic acids.

Items 134 to 951 of proposed Schedule
5 would provide expressly specified customs rates to be
imposed upon a variety of US originating goods. The schedule sets
out the relevant heading numbers that are to be amended. The
numbers correspond with the Harmonised Commodity Description and
Coding System 2002 designed by the World Trade
Organisation.(70) The goods subject to the changes set
out in items 134 to 951 are subject to phasing rates as stipulated
in Annex 2B of the AUSFTA.

Item 34 will commence at the
same time as the items 1 to 32
referred to above.

Under item 2, table item 5 of the Bill, these
amendments will only come into effect if the
Customs Tariff Amendment (Fuels) Bill 2004 and the AUSFTA come
into effect. The commencement date for the provisions in this Bill
will be the later of those two events.

Although AUSFTA is an unusually prescriptive
and detailed agreement, as with all international agreements, it
leaves some room for Australia to determine how it will change its
law to ensure compliance. As a result, implementation is not a
merely technical issue it involves substantive issues of policy as
well.

In general, the Bill s proposed approach to
implementation involves substantial reliance on regulations to
implement the details of the legislation, so that many of the Bill
s proposals merely involve extension of the Government s regulation
making power (for example, Schedules 4, 5, 6). This has the
advantage of allowing the Government flexibility to ensure that
AUSFTA is adequately implemented and that any concerns of the
United States can be more easily accommodated. It has the
disadvantage of involving less parliamentary scrutiny of those
details. Related to this, the Bill sometimes allows regulation to
extend to other countries the benefits that AUSFTA requires to be
given to the United States. This has the advantage of allowing the
Government to more easily pursue liberalising goals in investment,
government procurement and services, either unilaterally or through
subsequent agreements. Again, it has the disadvantage of reduced
parliamentary scrutiny of such extensions.

Schedules 1 and 3 8 appear to make the only
changes necessary to implement AUSFTA or allow regulations to
implement AUSFTA.

Schedule 2 implements AUSFTA but also goes
further, introducing further rules relating to data protection.
Apparently, these are proposed with the concurrence of major
stakeholders, including the states and territories. The Trade
Minister has foreshadowed a second suite of reforms to agricultural
and veterinary chemical regulation in a subsequent Bill.

Schedule 9 relating to copyright contains many
provisions required by AUSFTA. However, in some cases it fails to
implement AUSFTA adequately, goes further in protecting copyright
than AUSFTA requires or fails to take advantage of exceptions and
limitations that AUSFTA allows. Where these happen, substantive
policy choices are involved. It appears that Schedule 9 would give
Australia a more protective and more punitive copyright regime than
the United States. See the Guide
to the copyright and patent law changes in the US Free Trade
Implementation Bill 2004 for details.

The Government does not appear to have given
significant consideration to legislative change that might mitigate
some of the potentially negative aspects of AUSFTA. There may be
significant scope to make such change while maintaining compliance
with the text and spirit of the agreement.

The Opposition has indicated that it will
oppose the Bill unless two such changes are made. These relate to
introduction of a penalty for spurious patent claims (discussed
above) and enactment of local content standards in legislation,
rather than allowing them to be changed by the Australian
Broadcasting Authority. There seems no reason to believe that these
amendments would be inconsistent with AUSFTA.

However, there may be many more options to
makes these sorts of changes, especially in the area of
intellectual property. The failure to consider these may indicate a
concern with ensuring the implementation of AUSFTA by 1 January
2005. However, given the complexity of the Bill and the nature of
changes to the law it requires (and of course the long-term nature
of the agreement itself), it is the type of legislation that could
fruitfully be referred to a Senate Legislation Committee for
consideration. These issues of process might be considered in
future bilateral trade negotiations, possibly modelled on the US
Congressional trade promotion authority approach which provides
substantially more legislature involvement in all stages of
negotiation and implementation.

Bilateral disputes have included problems with lamb, steel and
Howe Leather, and these have reached the WTO dispute system. Of
course, since January 1995, the WTO Dispute Settlement
Understanding has been in place one of the great advances of the
WTO system (see Pru Gordon, The World Trade Organization , DPL,
Research Paper No. 10 1995 96, 23 October 1995) - and all
bilateral cases taken to the WTO have been resolved well.

See Ross Garnaut, An Australia United States free trade
agreement , Australian Journal of International Affairs,
56(1), 2002, p. 123.

The topmost decision-making body of the WTO is the Ministerial
Conference, which has to meet at least every two years. It brings
together all members of the WTO, all of which are countries or
customs unions. The Ministerial Conference can take decisions on
all matters under any of the multilateral trade agreements,
including the launch of a new round of multilateral trade
negotiations. The 1999 Ministerial held in Seattle, in the US, had
been expected to launch a new round of multilateral trade
negotiations, since a number of major agreements were due for
substantive review by 2000. Instead the Ministerial ended in
acrimony and chaos, in part due to the large anti-globalisation
protests outside, but also due to fundamental disagreements between
those such as the US and Europe pushing new trade agendas such as
trade and labour and trade and the environment to the complete
opposition of most developing nation members. For more information
on the Seattle Ministerial see the WTO
website.

This belief, while prevalent, is not necessarily correct. A
number of US domestic factors strongly affected the Seattle
Ministerial: see Bruce Donald, The
World Trade Organization (WTO) Seattle Ministerial Conference,
December 1999: Issues and Prospects , Department of the
Parliamentary Library (DPL), Current Issues Brief 12
1999-2000, 30 November 1999. In addition, it is entirely
unsurprising that as GATT/WTO has lowered average tariffs and its
coverage of topics has increased, it takes longer to achieve
agreements that will give additional significant gains. The
anti-globalisation movement, prominent in Seattle, is equally
likely to be opposed to bilateral trade deals as to
multilateral.

This was a decline from both 2001-02, with bilateral trade of
A$ 45.2 billion, and from 2000-01 with bilateral trade of
A$ 47.0 billion.

See ABS, 5352.0,
International Investment Position, Supplementary Country
Statistics, 2003, 20 July 2004.

However, while the Singapore-Australia Free Trade Agreement
came in effect in July 2003, Singaporean investment in Australia
actually declined by A$ 4.9 billion into 2003, and Australian
investment in Singapore declined by A$ 1.4 billion. Thus,
there is no guarantee that AUSFTA will ensure the continued
strength of this investment partnership.

This section is based on A. Rann, 'Chronology of events leading
to the Australia United States free trade agreement',
Unpublished memo, Foreign Affairs Defence and Trade Section,
Parliamentary Library, Department of Parliamentary Services,
Canberra, 2004.

For a history of discussion of the issue in recent decades see
Ross Garnaut, op cit., while for a longer history see A. Rann, op
cit.

This followed intensive negotiations between the two Ministers
(as opposed to only officials) from 26 January 2004. The same month
WTO Director-General Supachai was warning of the urgent need for US
leadership to revive the Doha Round.

See for example, Bill Carmichael (chairman of the former
Industries Assistance Commission), Vital to get independent gauge
of FTA benefit , Australian Financial Review, 11 March
2004, p. 79. Chris Wallace, US trade deal gets a laugh , The
Australian, 4 May 2004, p. 7, states that Professor Ross Garnaut
urged the Government to refer AUSFTA for independent assessment,
and that Dr Andy Stoeckel (CIE) conceded there might be merit in
such a referral, both testifying to the Senate Select
Committee.

Philippa Dee, The Australia.
US Free Trade Agreement: An Assessment, Paper prepared for
the Senate Select Committee on the Free Trade Agreement between
Australia and the United States of America, June 2004.

Rann, 'Chronology of events leading to the Australia United
States free trade agreement', op. cit.

For an analysis of the effect of the forthcoming US elections
on the current round of WTO negotiations see Geoff Kitney, Trade
talks rush to beat US election , Australian Financial
Review, 28 July 2004, p. 7.

See for example Mark Forbes, Sugar Doubts Could Kill Trade
Talks , The Age, 24 January 2004, p. 4. In this article
National Party leader Anderson is cited as saying it would be
un-Australian to accept any free trade deal without sugar being
included. In US sugar lobby likely to sink FTA , Canberra
Times, 24 January 2004, p. 9, Trade Minister Vaile is quoted
as saying We ve sought to do a comprehensive deal across all
sectors, including agriculture, including sugar, and we ve said
that sugar must be part of the deal and we re not conceding that
.

Single desk arrangements are those such as the Australian Wheat
Board where a single organisation coordinates all export sales, in
order to maximise returns to sellers. These are viewed as
anti-competitive, and potentially state-subsidised, monopsonies by
trade authorities in the EU and US. In most cases in Australia the
state owned nature of these organisations has been eliminated,
although often state regulations introduce an element of
uncompetitiveness to their operations. See also William Cooper,
U.S.-Australian FTA: Negotiations and Results , CRS Report for
Congress, updated March 12, 2004.

It is understood that this may be the result of Congress
informing the USTR that it believed those two FTAs overstepped the
mandate given in Trade Promotion Authority regarding labour
mobility.

William Cooper, U.S.-Australian FTA: Negotiations and Results ,
CRS Report for Congress, updated March 12, 2004. For a
discussion of some of the reasons the US did not insist on the
inclusion of these provisions, despite lobbying by business, see
Ann Capling and Kim Nossal, The Rise and Fall of Chapter 11:
Investor-State Dispute Mechanisms in the North American Free Trade
Agreement and the Australia-United States Free Trade Agreement ,
Paper prepared for the Oceanic Conference on International Studies,
Australian National University, Canberra, 14-16 July 2004.

IMF, World Economic Outlook, September 2003 (including
online data appendices). Note that the figure for share of world
GDP includes an adjustment for purchasing power parity (which
reduces the US share), and that the use of exports to measure trade
lowers US trade importance, since its imports are much higher than
its exports.

This point has been especially emphasised by Alan Oxley, see
for example, The Australian APEC Study Centre, Monash
University, An Australia-USA Free Trade Agreement: Issues and
Implications, August 2001, Ch. 6.

Including with Indonesia according to Andrew Stoler, Potential
goldmine awaits us under FTA , Australian Financial
Review, 25 February 2004, p. 55.

See DFAT s
overview of the agreement: in particular they claim Australia
will now gain the benefit of preferred status as an FTA partner
with regard to any future global safeguard actions - that is, we
will be exempted from safeguard restrictions almost automatically,
just as Canada was for steel and lamb . It is interesting to note
that of the cases brought against or by Canada in the WTO, 11 out
of 28 involved a dispute with the US (calculated from WTO
dispute database).

Indeed even the Marrakesh Agreement provisions have proved
unsatisfactory to many members and the Doha Round includes work to
further strengthen the restrictions on Article XXIV. Chanticleer
discusses this point, Some trade pluses for Australia ,
Australian Financial Review, 3 August 2004, p. 64.

According to the Cattle Council of Australia the safeguards
would have been triggered in 6 out of the past 10 years, during a
period of rising prices, see David McKenzie, Concern over deal ,
Weekly Times (Victoria), 18 February 2004, p. 10.

The U.S.-Singapore
Free Trade Agreement Report of the Trade and Environment Policy
Advisory Committee (TEPAC) February 27, 2003. Similarly the January
2004 WTO Trade
Policy Review of the US has raised questions about the
increased use of bilateral trade agreements by the US, noting that
care should be taken that negotiating and administrative resources
are not distracted away from the multilateral system and that
vested interests are not created that complicate multilateral
negotiations (WTO, Trade Policy Review of the United
States, January 2004, WT/TPR/S/126).

See for example Kim Nossal, Upper Hand down Under: American
Politics and the Australia-U.S. Free Trade Agreement , Paper
prepared for the Australian and New Zealand Studies Association of
North America Meeting, February 2004. The ALP members of the Senate
Select Committee claim that the electoral cycle made the
negotiating time frame unrealistic Recommendations of Labor
Senators on the Senate Select Committee on the Free Trade Agreement
between Australia and the United States , 2 August 2004.

Rule 5 of the Interpretation Rules provides as follows:
In addition to the foregoing provisions, the following Rules shall
apply in respect of the goods referred to therein:
(a) Camera cases, musical instrument
cases, gun cases, drawing instrument cases, necklace cases and
similar containers, specially shaped or fitted to contain a
specific article or set of articles, suitable for long-term use and
presented with the articles for which they are intended, shall be
classified with such articles when of a kind normally sold
therewith. This Rule does not, however, apply to containers which
give the whole its essential character;
(b) Subject to the provisions of Rule
5 (a) above, packing materials and packing containers presented
with the goods therein shall be classified with the goods if they
are of a kind normally used for packing such goods. However, this
provision is not binding when such packing materials or packing
containers are clearly suitable for repetitive use.

Submission to the Senate Select
Committee on the Free Trade Agrement between Australia and the
United States, Pastoralists and Graziers Association of
Western Australia, Submission to the Senate Select Committee, May
2004.

Vaile, op.cit.

Burton and Varghese, op.cit.

Recklessness requires that there be a substantial risk
of a circumstance (in this case, that the information is false and
misleading) and that it was unjustifiable to take that risk
(Criminal Code, cl 5.4).

Whether goods originate in the US is determined on the basis of
the origination rules. The reader is referred to the US Free Trade
Agreement Implementation Bill 2004.

Bruce Donald and Jacob Varghese
5 August 2004
Bills Digest Service
Information and Research Services

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